Tax insight

Cyprus addresses dividends, interest, and royalties from EU-blacklisted and low-tax jurisdictions

Insight
5 minute read
October 29, 2025

What happened?

The Cyprus Parliament passed bills modifying the taxation of dividends, interest, and royalties earned from Cyprus directly (or indirectly under an anti-conduit rule) by companies located in EU-listed non-cooperative jurisdictions (EU Blacklisted jurisdictions or BLJs) and low-tax jurisdictions (LTJs).

The amendment includes:

refining the withholding tax (WHT) provisions (in place from December 31, 2022) on dividends, interest, and royalties earned from Cyprus by companies located in EU Blacklisted jurisdictions directly or indirectly under an anti-conduit rule, which now provides a number of exemptions to avoid WHT imposition.
introducing a WHT on dividends and denial of expense deductibility for interest and royalties, each with effect from January 1, 2026, for income earned by related companies located in LTJs direct or indirectly under similar anti-conduit rules and exemptions as with BLJs.

Related anti-abuse decrees (one in relation to Cyprus income tax and one in relation to Special Defence Contribution), as part of the application of an anti-conduit rule, also were published to capture only cases where related companies are artificially interposed in non-BLJs. The two published decrees relate only to the BLJ WHTs as those provisions are currently in effect. It is expected that new/updated decrees will be published soon to address the provisions relating to LTJs that come into effect from January 1, 2026.

Why is it relevant? 

Although the law amendments mainly apply to dividends, interest, and royalties earned directly by related companies in BLJs (and from January 1, 2026, LTJs), the anti-conduit rule and related published decrees require consideration of the rules even in cases where income is earned directly by related companies in non-BLJs and non-LTJs from January 1, 2026.

Actions to consider 

Companies should assess whether the provisions in the laws and decrees may impact them and consider the potential implications on existing arrangements and structures.